Any business owner with even a passing interest in finance or investment will be well aware of the impact that cryptocurrency has had. Some have already made a fortune from the incredible rise of Bitcoin, while some experts believe that we have barely scratched the surface of crypto’s potential.
One area in which these cryptocurrencies struggle in a business sense is the ‘currency’ part. Established tales of paying for a pizza with a couple of Bitcoins are already firmly established in lore, but the act of buying and selling is not yet clear.
For a brief moment earlier this year, the landscape changed when Tesla announced that it would start to accept Bitcoin payments. Days later, they suspended the new initiative, citing environmental concerns.
Another issue raised by that same event was volatility. While perhaps oversimplifying the finer details, Elon Musk’s announcements caused wild price variations. Essentially, one individual caused a ‘currency’ to lose value. The fact that a solitary Tweet can purportedly cause such wild fluctuations all but confirms that businesses are not ready for crypto payments – at least not yet.
Dynamic pricing has never been more straightforward, especially with so many businesses selling online. However, while a perfectly valid technique, pegging a cryptocurrency price to a fiat value seems unintuitive.
Conversely, pricing up products and services in Bitcoin or other cryptocurrencies can prove extremely difficult. Referring once more to the Tesla event, the value of Bitcoin sank from $54,600 to $46,980 before settling at slightly above $50,000. That percentage swing alone is often enough to wipe out even the most generous margins. It appears that such pricing is not yet ready for primetime, especially at small businesses where cash flow is king.
Most businesses keep at least some cash on hand. If the past year has taught us anything, unforeseen generational events are rare, but they can happen. How and where businesses store that cash usually depends on the management team’s risk tolerance.
Smaller businesses have to contend with the balance between accessibility and growth. Ideally, every spare penny would go to work like an employee, making more money in the process. However, just as with payments, the inherent volatility, unpredictability and lack of regulation mean that cryptocurrencies may not be the wisest option.
One aspect of the Tesla event that made it so newsworthy is that it became one of the most notable companies to accept Bitcoin payments, even if only for a short time. Concurrently, one of the most significant reasons behind the struggle for acceptance as true currencies is that there are not all that many opportunities to spend them.
Some finance companies, especially challenger banks, are working to make this spending possible. For example, Revolut offers a Bitcoin debit card, while Monolith offers a similar card based on Ethereum. However, they operate just like any other MasterCard or Visa, respectively, to cardholders and businesses alike.
An official declaration of faith in cryptocurrency could represent an opportunity for those with a tolerance for risk or extreme bravery in the marketing department.
All the risks already outlined still apply, but there is potentially something to be said for ranking in Google as the business in a specific sector that accepts Bitcoin and Ethereum payments. There are even websites out there dedicated to listing UK retailers that accept cryptocurrency, and competition is not exactly fierce.
The fact that cryptocurrencies are not regulated and wholly disassociated from the traditional banking system are two of the main reasons for their appeal among supporters. However, it is impossible to say how this will change in the future.
China has taken steps to regulate and even criminalise cryptocurrencies through account closures. Cryptocurrencies are almost entirely illegal in North Africa. Conversely, some countries are placing crypto at the centre of their financial policy. In June 2021, El Salvador became the world’s first country to recognise Bitcoin as legal tender.
While the days of becoming a millionaire through patience with a small investment are potentially behind us, the concept remains in its infancy. Small business owners will join everyone else with financial interests in seeing how the world adapts to the opportunity.
Anything that represents both a risk and an opportunity often interests businesses of all sizes. As a result, cryptocurrency could conceivably become the most active means of buying and selling goods and services, and more quickly than anyone might assume.
The potential impact is difficult to ignore, and most businesses should ensure they have a working knowledge of current events around the subject and what it means for them. This might involve buying some cryptocurrency on behalf of the business to have ‘skin in the game’ or testing out a potential new revenue stream on a trading platform like Coinrule.
Something that small businesses should not do with an eye on the future is bury their heads in the sand and hope that cryptocurrency goes away. The total value of every Bitcoin in existence was $653 billion as of 30th May 2021. For reference, Tesla, one of the primary protagonists in this story, is worth just under $621 billion as of 19th July 2021.
While cryptocurrencies cannot be ignored, there is nothing wrong with small businesses biding their time. To reiterate, these currencies may represent an opportunity, but they are certainly not devoid of risk. They are unlikely to change anything substantial in the world of small business in the near future and the prudent thing to do, at least for the time being, is nothing at all.
Smaller companies are at the stage where the ball is spinning around the roulette wheel, and nobody yet knows where it might land. One of the benefits of being a relatively minor player is that nobody is waiting for you to make the first move.
Nevertheless, it is essential to understand that things can and will change, and preparedness can pay off. Those with a heightened risk tolerance can attempt to grab the opportunity, but there is little chance of anyone being left behind if they are prepared to act when the time is right.